Saturday, February 17, 2024

Brian Easton: Puffing Policy

Public policy towards tobacco consumption remains politically sensitive.

In 1983, a young researcher was told by a medium-level Treasury official that Treasury policy was to abandon excise duties on tobacco. The senior Treasury economist that I consulted, famed for his commonsense, snorted ‘we need the money’. He explained that no-excise-duty was the ambition of a couple of very ideological Treasury officials – later we would call them ‘Rogernomes’ or ‘neoliberals’ – who objected to state intervention.

I recount this incident to remind you that tobacco policy has an ideological dimension as well as being affected by lobbying from the commercial tobacco interests, which are not particularly ideological but pursue their self-interest. A ‘Socialists for Ciggies’ lobby would be generously funded too. (One may suspect the funding of favourable lobby groups tobacco interests is because they do not want New Zealand successes to set an international example.)

Understanding the ideological dimension explains why some not very impressive arguments are trotted out to justify reducing tobacco excise. It is common for an ideological justification to be clothed in practical garb. Understanding the commercial lobbying explains why alcohol excise is not also under review. The liquor interests cannot be spending enough on the right-wing lobby groups.

Tobacco excise duties are still Treasury policy; it still needs the money. But there is a sound economic justification for excise duties on tobacco. Smoking damages smokers’ health, compromising heart and lungs and triggering cancers. The tobacco excise contributes to the cost of health service treatments. (The revenue actually exceeds annual costs. However, if everyone stopped smoking tomorrow, they would experience some health gains immediately, but would still have higher treatment costs for some decades. So the duty is covering future costs, just as taxing carbon emissions is intended to offset global warming which lasts centuries.)

The priority of revenue collecting is demonstrated by the fact that currently the level of excise duty is indexed to general consumer prices. As prices rise, so does the tax (although there are some in the current government who would like to end this practice). The indexation arose because it was such a hassle for Treasury to get the Minister of Finance to raise the excise rate; now it is automatic. The small incremental changes probably don’t have a lot of effect on smoking, whereas holding off the increases and then having a big increase encourages more smokers to give up.

Another economic dimension has been the smoke-free legislation. Once smokers had the right to pollute others’ airspace, which many non-smokers found offensive. The realisation that passive smokers could also suffer health damage led to a law change which removed the right for a smoker to infringe the airspace of others. The health damage from passive smoking is quite small compared to that from active smoking, but it provided the political lever to introduce the smoke-free legislation.

Over the years the amount of smoking has decreased. In 2011 the government set a target of only 5 percent of smokers in the population by 2025. That seemed ambitious at the time but it looks as though the target will be attained.

The big difference may be the introduction of vaping which enables the tobacco addict to switch access to a nicotine source which appears to be less harmful, because there is less poison in the inhaling. We cannot be sure how less harmful it is. It took decades to track how much tobacco damaged health and we have insufficient data to be sure of vaping’s long-run effects. (The medical advice is that addicted smokers should switch to vaping, but non-smokers should not take it up.)

The neoliberal’s ideological case is that they object to the state interfering in individual lives, especially when it tries to change behaviour. If people want to smoke, they are entitled to make that decision without state interference. I am not unsympathetic to that general principle, especially if the smokers are paying for their health (and other social) costs and they are not infringing others’ airspace.

The economics discipline is framed by the importance of individual choice. But how addiction fits into the economists’ approach is unclear. Most smokers are addicted to nicotine; many wish they could give up smoking, but they can’t. It is easy to say ‘don’t get addicted’ but it happens with other things we consume. (Kate Shepherd famously remarked that ladies of her time were addicted to cups of tea.)

The economics approach to personal decision making began before psychology as a science was founded. Behavioural economics draws upon modern psychology, but I have yet to see how it incorporates addiction. (Some of the neoliberal arguments are just plain silly. A famous one was that being unable to give up an addiction was akin to saying you wanted to get married but could not find anyone to marry.)

I am uneasy that the (handful of) tobacco companies profit from getting people addicted to their product despite it being harmful. That position is not based on deep economic theory but on the commonsense of a senior Treasury official. In particular it suggests we should target behaviour which results in addiction.

We are not going to stop teenagers trying out a fag, especially if their elders say ‘don’t’. Daily smoking is already low among teenagers, Hopefully they will completely stop by their early twenties. That should be an aim of public policy.

This approach suggests we should not get too agitated about the (diminishing proportion of) older adult smokers. They are paying for the costs of their health care (although sometimes, say for heart conditions, they will not be treated unless they give up smoking because the treatment is not very effective). They are not polluting our airspace. We may be sorry for them; we should give them as much assistance to give up smoking as we can. But they know the risks.

I expect the previous paragraph will cause outrage among some of my colleagues in the health profession. Theirs is a different ideology committed to saving every life they can. Their view is smokers are killing themselves; they should not. It is an approach I respect – it involves a commitment to preserving life well beyond what the advocates are paid. But we all do risky things, like skydiving and jay walking, aware there are dangers.

Indeed, we may be facing a dispute within the anti-tobacco lobby about what to do once the target of five percent smokers is attained. One side will want to reduce the target further; the other will be more relaxed about adult smokers, focusing the effort on limiting adolescent smoking. Meanwhile the neoliberal lobby, backed by the commercial tobacco interests, seems to be in office and perhaps in power. We may be facing a major political wrangle, but a three-sided one.

Brian Easton is an economist and historian from New Zealand. He was the economics columnist for the New Zealand Listener magazine for 37 years. This article was first published HERE


Barend Vlaardingerbroek said...

Here's another economic 'take':
Non-smokers supposedly live 14 years longer than smokers;
Most of those 14 years are after age 65 and therefore represent 14 years of Superannuation and 14 years of spiraling geriatric care costs;
Smokers are therefore saving the State heaps of money by popping off early.
Conclusion: Remove punitive taxes or, better still, subsidise our habit!

Anonymous said...

Spot on Barend.
What about punitive taxes on sugar and carbs more generally or prevent the consumption of a known cause of T2 diabetes in the sight of children. etc. etc.

Tom Logan said...

One of the problems for socialists is they really like to put the boot in. Because they always know best.

Drug addiction is now treated as more of a health problem than a crime. So why not smoking ? Clearly now when you have gotten smoking down to just about the last 5%, the residual smokers are serious hard core addicts. And no doubt they suffer from numerous other social problems. So why not treat smoking like a health problem ?

Why keep putting the boot in ?

Because any extra money they spend on smokes will come as it does now, from their kids dinner tables. It's the kids that will suffer.

And you seek to make political capital from this Mr Easton. As did the Opposition. They threw all sorts of false allegations at the Government over their association with the tobacco industry though they could produce no documentary evidence with which they could substantiate such allegations. Despite all the bitter and entitled Labour stooges within the civil service these days that act as if leaking confidential documents is a right of their employment.

So your comments in your 2nd and then final paragraphs seem to be somewhat tenuous.

You state in paragraph 2 that " A Socialists for Ciggies Lobby would be generously funded too ". This implies not only a Right wing pro smoking lobby is in existence but more importantly that it is having some effect on Government policy. Clearly from Labour's lack of evidence to support it's allegations, if such a Right wing lobby exists it is having little or no affect on government smoking policy. Certainly none could be proven.

In your final paragraph you suggest , " Meanwhile the neo liberal lobby backed by the commercial tobacco interests seem to be in office and in power". Really Mr Easton. If this is so perhaps the Labour Party would have appreciated your evidence to this effect a few weeks ago !

Perhaps a better idea is that every venue that sells fags has information detailing the availability of stop smoking programmes displayed ,
and that every packet of fags sold has a leaflet inside it with the same information. And that such programmes are widely available and generously funded

Meanwhile Labour just wants to keep putting the boot in . Which means taking dinners of kids tables.

Empathic said...

Tom Logan: Yes, government is certainly putting the boot in to smokers, and among those who still smoke are the most vulnerable, poor and disadvantaged. A high proportion of people with serious mental illness smoke for various reasons, including distraction from their minds' torment, relief of boredom given their inability to engage in normal activities, and the huge difficulty of maintaining focus and enduring the suffering of nicotine withdrawal while they are trying to cope with their torments. High taxes on tobacco are nothing but cruel for them, making even more difficult any task of finding and paying for secure accommodation, and leading them to risk infection (and more severe carcinogen concentrations) by searching for and smoking other people's discarded butts. Stop putting the boot in to the vulnerable! It won't stop them from smoking.